Solar Energy Threatens Profits of Old Time Utilities, Not The Poor

For investor owned Tuscon Electric in Arizona, and Nevada Energy, solar energy is a threat that calls for rate hikes and new monthly charges as high as $50 a month and slashing net metering payments for rooftop solar.

New charges will make sure everyone “pays their fair share” for maintaining the utility distribution system. Otherwise, the utility would have to raise rates, and hurt the poor who can’t afford solar. For the suits and their PR guys, solar’s just another yuppie ripoff.

Or is it?

At Con Edison in New York, they are singing a different tune. “Demand for solar is soaring … We will be ready for this change,” says Con-Ed CEO John McAvoy. “We won’t just respond to change. We will lead.”

Meanwhile, at Pacific Gas and Electric (PG&E), the company is helping meet California’s goal to slash greenhouse gas emissions 40 percent by 2030 and grow the economy. PG&E is aggressively supporting PV and other renewables, energy efficiency, and making huge investments in charging stations to get more electric cars on the road.

Solar energy in Leotho, Africa.

What Con-Ed and PG&E understand is that the successful 21st century electric utility will sell much more energy, not less. Electricity, not gasoline, will power our cars. Electricity, not natural gas and oil, will heat and cool homes through efficient heat pumps.

A 21st century utility will be a smart network ultimately integrating millions of distributed sources of power from solar, wind, and car electric car batteries plugged into the system. The 21st utility will earn it’s money by operating and coordinating the smart and efficient renewable grid, not by selling power from a handful of giant fossil fuel and nuclear plants.

For old time utilities like Tucson Electric with their old time rate incentives, each kilowatt hour they do not sell is a direct hit to the bottom line.

Millions are now replacing incandescent bulbs with LEDs, using 75% less energy. Sales will plunge, and utilities’ rates will rise if they are based on income from sales, not on efficient use of the distribution system.

The Tucson Electrics of the world haven’t the nerve to put out press releases saying that LEDs, which cost more than incandescents, are a threat to the poor, and people who save, should pay a steep monthly surcharge on their bills.

But that’s exactly what they are saying about solar energy. Generating a kilowatt on your roof is no different then saving a kilowatt with an LED.

For each kilowatt you don’t buy through efficiency improvements, or don’t buy because you produced it yourself, the same thing happens. You don’t pay the utility for the power or for the cost of delivering it to your home.

Net Metering

Utilities across the country are also digging in their heels against net metering. If your solar system produces more power than you use, it’s sold back to the utility at a credit for both the distribution cost and the value of power. Literally or figuratively, the energy you generate spins your electric meter backward.

If the meter literally spun backward or calculated electronically your monthly net use between power purchased or power generated and sold back into the grid, your monthly bill would be reduced by the total amount of electricity produced.

If you produced more energy than you used, your electric bill would be zero, except for the monthly customer charge, and the net metering credit would be carried forward as a credit to next month.

For the old time utility, this is the worst of all worlds. And this is what they are fighting with all their might.

But the truth is that net metering credits are sold back to you at full price by the utility for distribution and energy. The real reduction to the bottom line in a year from net metering is zero. Every kilowatt hour you generate and receive a credit for net metering, you redeem by buying a kilowatt from the utility for the full distribution and energy price.

The real problem is a 20th century revenue model threatened by 21st century renewable, efficiency, and smart grid technology. The answer for utilities and regulators is what PG&E and California understands – sell more efficient renewable electricity and be able to make money as operator and facilitator of the smart grid.